ESG summary

ESG - It’s a type of corporate reporting that shows how a company performs and behaves in these 3 areas — helping ___ (public, investors, governments) assess how sustainable and __ the company is.

stakeholders ethical

• Environmental: How a company impacts ___ — carbon emissions, pollution, resource use.

• Social: How a company ___ people — employees, communities, supply chain workers

Governance: How a company is ___ — ethics, leadership, transparency, policies.

nature, treats, managed

ESG reports combine _____ and nonfinancial data to show how sustainable a business is now and in the ___.
They’re often linked to the UN Sustainable Development ___ (SDGs) and are becoming critical for ___who see ___ risk as ___ risk. 

financial, goals, investors, climate, financial

ESG is important because it:

• Builds ___ and legitimacy.

• Reduces ___ and increases profitability.

• Attracts investors and customers who care about sustainability.

• Provides insight into long-term viability and adaptability.

• Can lower the cost of ___ (cheaper financing).

Helps companies identify opportunities in sustainability transitions.

reputation, risks, capital

 Who Wants ESG Reporting?

🧍 Public:

• Increasing demand for ____ and accountability.

• Public pressure due to awareness of climate change, human rights, and social justice.

• Companies are now rated ____ on ESG __.

transparency, publicly, performance

who wants ESG reporting 💰 Investors:

• Use ESG data to assess financial ___ and ____.

• ESG ratings affect access to ___ and firm ___.

• ESG-focused companies are more ___ in market crises.

• Investors compare companies’ ESG performance over time.

risk creditworthiness capital valuation resilient

Challenges in ESG Reporting

1. Lack of ___

   • Too many ____ (1,000+ indices).

   • ESG ratings by major agencies only agree about 24% of the time.

   • Difficult to compare companies across ___.

standardization, frameworks, industries

1. Company Confusion

   • Firms don’t know what or how to ___.

   • Different time frames, metrics, and measurement units.

report

1. Weak Legal Framework

   • ESG reporting is often ___.

   • Managers report ____, sometimes exaggerating positives.

   • Third-party assessments help, but don’t fix inconsistency.

voluntary selectively

1. Regional Differences

   • ____ leads in ESG requirements.

   • North America (U.S. & Canada) lags behind in ___ disclosures.

   • EU firms more likely to link ESG goals to __.

Europe, mandatory, strategy

1. Political & Social Factors

   • Laws depend on political ___.

   • Demand from citizens and investors can push for stronger ___.

will, rules

UN Sustainable Development Goals (SDGs)

• 17 goals adopted in 2015 for peace, prosperity, and __ the planet by 2030.

• __ reporting often aligns with these goals.

protecting ESG

Task Force on Climate-Related Financial Disclosures (TCFD)

• Created by the Financial Stability Board.

• Key idea: “Climate risk is financial risk.”

• Recommends companies report ____-related financial data.

• Focuses on 4 thematic areas:

  1. Governance

  2. Strategy

  3. ___ Management

  4. Metrics & ___

• Goal: integrate climate risks into company strategy and capital __.

climate, risk, targets, allocation

International Financial Reporting Standards (IFRS)

• Set by the International Accounting Standards Board (IASB).

• Works with International Sustainability Standards Board (ISSB) for sustainability standards.

• Aims for one global set of ____ + sustainability disclosure standards.

• 2 key proposals (2022):

  • ___ sustainability disclosure.

  • ____-related disclosure.

• Builds on TCFD recommendations.

accounting, general, climate

Sustainability Accounting Standards Board (SASB)

• Founded in 2011 to set ____-specific ESG standards.

• Now merged with the International Integrated Reporting Council (IIRC) to form the ____Reporting Foundation.

• Helps firms report ____material sustainability information.

• Covers 77 industries.

• Focuses on 5 ESG dimensions:

  1. Environment

  2. ____Capital

  3. ___Capital

  4. Leadership & Governance

  5. Business Model & Innovation

Purpose: Improve ___and help investors __firms.

industry, value, financially, social, human, transparency, compare 

Global Reporting Initiative (GRI)

• Focuses on the economic, environmental, and ___ impacts of ___ (not just financial ones).

• Used by a wide range of stakeholders, not just investors.

• SASB = ___-focused
  GRI = ____-focused

Many companies use both SASB + GRI for a complete ESG picture.

social companies investor stakeholder

🌱 Environment

• How business activities impact ecosystems and resource use.

• Includes climate change, carbon emissions, biodiversity, and resource ___.

Directly affects a firm’s __-term value.

depletion, long

 Social

• How a company treats people — employees, suppliers, communities.

• Includes labor ____, human rights, diversity, gender equity, income ____, and employee well-being.

• Employee satisfaction = better long-run performance.

standards, distribution

 Governance

• How a company is managed and held accountable.

• Includes board structure, ethics, policies, shareholder rights, compliance, and anti-____ measures.

• Transparent governance builds trust.

corruption,

 SEC (U.S.) Rulings

• The Securities and Exchange Commission (SEC) is adding ESG rules to improve consistency and comparability.

• 2020: Companies had to report on ____ capital (Social pillar).

• 2022 Proposal: Standardized climate-related disclosures:

  1. Governance of climate-related risks.

  2. Impact of climate risks on financial statements.

  3. Effects on business ____ and outlook.

  4. Impact of severe weather and transition activities.

human, strategy

Emissions Reporting (Scopes):

• Scope 1: ___emissions (owned sources).

• Scope 2: ____ (purchased energy).

Scope 3: ____/downstream emissions (value chain).

direct indirect upstream 

Goals:

• Improve transparency, comparability, and reliability of ESG disclosures.

• Use a ____ rollout by filer size.

Allow investors to compare ESG funds easily via standardized tables

phased

Purpose of ESG	Show sustainability and ethical performance.
Who Wants It	Public (accountability), Investors (risk & value).
Main Frameworks	SDGs, TCFD, IFRS/ISSB, SASB, GRI.
Main Challenges	Lack of standardization, legal framework, comparability.
Biggest Benefit	Builds trust, attracts investors, reduces risk, improves profitability.
Future Direction	Toward mandatory, __ global ESG reporting (IFRS + SEC).

standardized